Over-the-Counter Drug Reimbursement Approved by the IRS!

The IRS has recently announced (September 3, 2003) that over-the counter (OTC) drugs can be reimbursed by Health Care Flexible Spending Accounts (FSA). This is a major change from the previous IRS position that only prescription drugs were eligible for reimbursement.

The Treasury/IRS announcement said the change was being made, “since many prescription drugs have moved to the over-the-counter market” such as the popular antihistamine Claritin. The revenue ruling mentions the purchase of antacid, allergy medicine, pain reliever and cold medicine as examples of eligible OTC drugs. OTC drugs that are taken for general health reasons (such as the cost of dietary supplements and vitamins) are specifically excluded.

Please note that even though OTC drugs are now reimbursable from Health FSAs, they continue to be non-deductible for purposes of itemizing medical expenses on Schedule A of your Federal tax return.

Attached is a revision to your Summary Plan Description.

Full Issue: No. 41 - September 12, 2003

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